Junior Accountant for the Tesco Plc - Report Writing - Finance Assignment Help

Assignment Task:

Assessment Brief 

Introduction

You are a junior accountant for the Tesco Plc, a company listed on the London Stock Exchange. The following items are to be discussed at the next board meeting and the directors have asked you to write a report giving advice on the following areas. Nb: all areas should be answered. 

1.1 Financial Analysis 

a) A shareholder has raised concerns regarding the financial performance of Tesco Plc compared to its competitors. Using the 2019 Annual Report and any other relevant research, and with the use of Financial Ratios, critically assess the financial and operating performance of Tesco Plc. Your assessment should draw a comparison to a competitor(s) and sector averages whilst also specifically addressing the shareholders’ pension concern. (You need to choose two competitors). 

All sources of information used in your analysis should be Harvard Referenced as per the General Assessment Advice above.

b) Discuss and explain FOUR possible limitations on the usefulness of ratio analysis as a tool for making the above comparisons.

1.2 Company Valuation 

a) Using the Annual Report used in part one as a basis, calculate the value of Tesco Plc using the following methods: 

• Asset-based valuation; 

• Dividend Valuation Model (using CAPM to estimate the required return to the shareholders); and 

• Comparable P/E ratio. 

State any assumptions you make and include in your appendices any excel calculations. Your appendices should also include a spreadsheet of the formula’s used. 

b) Critically discuss the valuation methodologies used above and provide an argument for the amount you expect the Tesco Plc to be worth.

Requirements: 

a) Calculate the cost of debt of the convertible bonds for Absolute plc.

b) If a dividend of £0.30 per ordinary share has just been paid by Absolute plc, calculate it’s the cost of equity. 

c) Calculate the Weighted Average Cost of Capital (WACC) of Absolute plc.

d) ‘The calculation of WACC is straightforward in theory, but difficult in practice’. Critically evaluate possible difficulties that may be experienced when trying to calculate WACC.

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